Tests of asset-pricing models: How important is the iid-normal assumption?

Journal of Empirical Finance

Volumn 8, Issue 4, 2001, Pages 427-449

  Groenewold, Nicolaas ^a   Fraser, Patricia ^b  

^a UNIVERSITY OF WESTERN AUSTRALIA   (Australia)

^b UNIVERSITY OF ABERDEEN   (United Kingdom)

Author keywords

Asset pricing models; Bootstrap; C120; CAPM; G120; Iid normal; J test

Indexed keywords

EID: 0005866764     PISSN: 09275398     EISSN: None     Source Type: Journal    
DOI: 10.1016/S0927-5398(01)00035-4     Document Type: Article

References (33)

1. Affleck-Graves J., McDonald B. Non-normalities and tests of asset pricing theories. Journal of Finance. 44:1989;889-908.
2. Ariff M., Johnson L.W. Ex ante risk premia on macroeconomic factors in the pricing of stocks: an analysis using arbitrage pricing theory. Ariff M., Johnson L.W. Securities Markets and Stock Pricing. 1990;194-204 Longman, Singapore.
3. Beenstock M., Chan K. Economic forces in the London stock market. Oxford Bulletin of Economics and Statistics. 50:1988;27-39.
4. Berkowitz J., Kilian L. Recent developments in bootstrapping time series. Finance and Economics Discussion Paper Series No. 1996-45, Division of Research and Statistics and Monetary Affairs. 1996;Federal Reserve Board, Washington, DC.
5. Campbell J.Y. Stock returns and the term structure. Journal of Financial Economics. 18:1987;373-399.
6. Campbell J.Y. Intertemporal asset pricing without consumption data. American Economic Review. 83:1993;487-512.
7. Chen N., Roll R., Ross S.A. Economic forces and the stock market. Journal of Business. 59:1986;383-403.
8. Chou P.H., Zhou G. Using bootstrap to test portfolio efficiency. Paper Presented to the Fourth Asia-Pacific Finance Association Conference, Kuala Lumpur. 1997.
9. Clare A.D., Thomas S.N. Macroeconomic factors, the APT and the UK stock market. Journal of Business Finance and Accounting. 21:1994;309-330.
10. Clare A., O'Brien R., Thomas S., Wickens M. Macroeconomic shocks and the domestic CAPM: evidence from the UK stock sarket. Centre for Empirical Research in Finance, Brunel University, Discussion Paper 93-02. 1993.
11. Clare A.D., Smith P.N., Thomas S.H. UK stock returns and robust tests of mean variance efficiency. Journal of Banking and Finance. 21:1997;641-661.
12. Cumby R.E. Consumption risk and international equity returns. Journal of International Money and Finance. 9:1990;182-192.
13. Davison A.C., Hinkley D.V. Bootstrap Methods and Their Application. 1997;Cambridge Univ. Press, Cambridge.
14. Efron B., Tibshirani R. An Introduction to the Bootstrap. 1993;Chapman & Hall, New York.
15. Engel C., Frenkel J.A., Froot K.A., Rodrigues A.P. Tests of conditional mean-variance efficiency of the US stock market. Journal of Empirical Finance. 2:1995;3-18.
16. Faff R.W. A likelihood ratio test of the zero-beta CAPM in Australian equity returns. Accounting and Finance. 31:1991;88-95.
17. Faff R.W., Brooks R.D. Time varying beta risk for Australian industry portfolios: an exploratory analysis. Journal of Business Finance and Accounting. 25:1998;721-745.
18. Faff R.W., Lau S. A generalised methods of moments test of mean variance efficiency in the Australian stock market. Pacific Accounting Review. 9:1997;2-16.
19. Ghysels E., Hall A. A test for structural stability of Euler condition parameters estimated via the generalized method of moments estimator. International Economic Review. 31:1990;355-364.
20. Gibbons M.R. Multivariate tests of financial models: a new approach. Journal of Financial Economics. 10:1982;3-27.
21. Gibbons M., Ferson W. Tests of asset pricing models with changing expectations and an unobservable market portfolio. Journal of Financial Economics. 14:1985;217-236.
22. Gibbons M., Ross S., Shanken J. Testing the efficiency of a given portfolio. Econometrica. 57:1989;1121-1152.
23. Groenewold N., Fraser P. Share prices and macroeconomic factors. Journal of Business Finance and Accounting. 24:1997;1367-1383.
24. Hansen L. Large sample properties of generalized methods of moments estimators. Econometrica. 50:1982;1269-1286.
25. Hoffman D., Pagan A. Post-sample prediction tests for generalized methods of moments estimators. Oxford Bulletin of Economics and Statistics. 51:1989;333-343.
26. Li H., Maddala G.S. Bootstrapping time series models. Econometric Reviews. 15:1996;115-158.
27. MacKinlay A.C., Richardson M.P. Using generalized methods of moments to test mean-variance efficiency. Journal of Finance. 46:1991;511-527.
28. McElroy M.B., Burmeister E. Arbitrage pricing theory as a restricted nonlinear multivariate regression model: iterated nonlinear seemingly unrelated regression estimates. Journal of Business and Economic Statistics. 6:1988;29-42.
29. McElroy M.B., Burmeister E., Wall K.D. Two estimators for the APT when factors are measured. Economics Letters. 19:1985;271-275.
30. Mills T.C., Coutts J.A. Misspecification testing and robust estimation of the market model: estimating betas for the FT-SE industry baskets. European Finance Journal. 2:1996;319-331.
31. Pesaran, M.H. and A. Timmermann, 1997, A Recursive Modelling Approach to Predicting UK Stock Returns, Cambridge University and University of Southern California.
32. Richardson M.P., Smith T. A test for multivariate normality in stock returns. Journal of Business. 66:1993;295-321.
33. Wood J. A cross-sectional regression tests of the mean variance efficiency of an Australian value weighted market portfolio. Accounting and Finance. 31:1991;96-107.